By Priya Saraff
According to a recent report by Boston Consulting Group (BCG) and Google India titled “Digital Consumer Spending in India: $100 billion Opportunity“, the digital spending in the country is expected to reach $100 billion by 2020 from the current figure of $40 billion. Currently, India has 430 million internet users, only 20% of whom engage in online shopping spending hardly 5-10% of their monthly expenditure. Online shopping websites plan to increase this percentage so that the overall spending in India increases. Research has found that consumers spend most on financial services, digital media, booking tickets for movies and hotels. Accessories, apparel, electronics, food and grocery dominate the e-commerce sector.
Trends among consumers
According to the report, the traditional Indian online shopper was an urban male millennial. However, times are changing rapidly and by 2020, women shoppers will increase by 2.5 times and shoppers above the age of 35 will increase by 3 times. 50% of online shoppers are expected to be from cities other than metros.
A 2016 BCG report called ‘The Rising Connected Consumer in Rural India’ estimated that by 2020, 300 million users will be from rural India. The study reveals that rural users are mostly male and 60% of them have started using the internet only in the last two years. To provide a nuanced picture of the usage patterns, the report subdivided the rural population into categories such as unemployed, farm owner/student, farm worker/ labourer, self-owned business and service worker/trader. It similarly created age brackets of 18-30, 30-40, 40-50, and 50 and above years. It then analysed the intersection of these two factors.
Almost all millennials, regardless of employment, use the internet for social networking and gaming. Older and unemployed people do not use the internet at all. As occupations change from ‘unemployed’ to ‘service worker/trader’, activities such as emailing and e-commerce are added to the list. That is to say, internet activity becomes more formal and business oriented in the ascending order of employment.
Quite predictably, internet activity decreases in the ascending order of age. The exceptions to this trend are those aged 30-50 years owning businesses or working in the service sector. These people network, game, and shop (just like people of age group 18-30 in the same occupation), perform banking activities and read newspapers. The elderly (50 years and above), on the other hand, are either completely unacquainted with the internet or use it minimally for reading the newspaper.
Digital influence on purchasing amongst the rural population is high. As much as 15% of rural consumers use the net to research, purchase or rate a product. In product categories such as electronics, digital influence on rural users is not far behind the influence on urban users, influence here being the percentage of people ordering products online. There is a larger gap when it comes to apparel, consumer durables, and entertainment. Online commerce is yet to pick up in rural areas, but with its numerous choices, discounts, and overall convenience, its popularity will only grow from here.
What’s working and how to spur transactions
The factors for increasing spending include discounts, numerous payment platforms, efficient delivery systems, increasing financial investment in this sector and the resulting undeniable convenience of it all. The BCG report suggested a number of measures to further spur the transactions. For ‘occasional shoppers’, who make up to 75 – 85% of the online population, innovative delivery system, discounts, real value propositions and post-sale services will boost their expenditure. For ‘frequent shoppers’, making up the other 15-25%, customised communication and loyalty programmes that build closer relationships with them are found to be effective. Those who are primarily offline will have to be convinced of product quality before they move to online shopping.
A report by BCG, titled ‘Decoding Digital Consumers in India’, provides more general but useful tips to companies for making their online commerce successful. It urges companies to offer solutions and not just products. This could mean offering ancillary products with the main one or creating multiple points of value. Partnering with others is another important tactic. A common example is that of courier companies partnering with e-commerce platforms. Though costs may increase, performance and efficiency will improve. The report encourages companies to invest in the online sector keeping in mind India’s full potential. Many businesses route development of India’s digital sector like that of developed countries, but this may be underestimating all that India can do. Finally, the report suggests that businesses take on one channel at a time instead of a half-done omnichannel approach. With opportunities available both online and offline, a single channel can be chosen and perfected. For those insistent on an omnichannel approach, the dynamic interplay of factors from both the consumers’ side and retailers’ side will decide which channels will be the most successful. These complexities have to be kept in mind and worked with to optimise channel usage.
India’s digital sector is heading in the right direction. It is not just growing numerically, but also more inclusively. Perhaps, it is the smartphones that have bridged the gap between various levels of society in a way nothing else ever could. Perhaps we will find our unity online.
Featured Image Source: Visual Hunt